Late payments have always been a big issue for freelancers and contractors, which can cripple the cash flow of a business.
Numerous studies have shown that small and micro-businesses are the least likely to be paid on time and for small contractors, the same is also true.
During this difficult period, it is important that you are paid on time for the work that you do, especially due to the lack of Covid-19 financial support available to many freelancers.
To help, we have put together some tips to help contractors avoid late payments.
Keep invoices updated and accurate
Make sure that invoices are sent out on time and that they are accurate. Ensuring your invoicing procedures are effective can make a massive difference. It is recommended that you:
- Send invoices as soon as possible
- Email or send invoices electronically rather than sending by post
- Ensure that the invoice is addressed to the right person
- Make sure that there are no mistakes in the invoices
- Confirm that the invoice has been received.
It isn’t just the responsibility of your clients to ensure payments aren’t late.
Strengthen your credit control
Contractors should have a clear and coordinated procedure for credit control, which is followed for every job.
This should establish a realistic timetable for payments and outline credit terms that should be based on the needs of the business.
Where a client delays payment do not be afraid to chase them. Effective credit control is often about finding a balance in your relationship, so always be firm, fair and professional.
Make payments easier
There has never been more choice when it comes to payment methods, so contractors should make sure that they can offer as many as possible. This may include:
- Credit/debit card
- Online payments, such as Stripe and PayPal
Just make sure all payments are correctly accounted for so that they can be reported to HM Revenue & Customs.
Research new clients
A small amount of due-diligence beforehand can help to identify problem payers. Undertaking a simple credit report on a new customer can help to reveal if they have had any issues making payments previously.
Undertaking these checks allows you to make informed decisions about the terms and conditions associated with each contract.
Offer incentives to late payers
Freelancers struggling with late payments could look to add incentives to the payment process if they are struggling.
This could be something as simple as offering early settlement discounts to clients when they pay on time.
These incentives can be incorporated into your pricing structure so that profit is unaffected.
Late payment charges
When the carrot doesn’t work sometimes it is necessary to use the stick a little. Freelancers are allowed, by law, to charge late payment fees and interest on commercial debts.
If a client continually refuses to pay on time or is withholding funds then it may become necessary to start adding a fee to your existing costs. This can affect working relationships, but in extreme cases, it may be necessary to ensure you are paid.
How we can help
First and foremost, we regularly review your invoices to ensure they have been paid as per your contract payment terms and will of course advise you if any invoices are outstanding so that the payment can be chased.
Chasing clients for unpaid invoices can be time-consuming and the FreeAgent accounting software has automatic reminder emails that you can set up which lets your invoices chase themselves.
As part of the process of joining our firm, we will make sure that the necessary systems are in place so that your pay is unaffected – making the switching process much easier.
We also employ the latest accounting software through FreeAgent to help with the creation of invoices and debtor control, while those choosing our Total Access service will get direct support in chasing outstanding payments from the experienced Cogent team.
To find out how we can help, please contact us by calling 020 8952 2234 or emailing email@example.com